3 Answers
3

"Food service" is attested by Google Ngram Viewer starting around 1900, and is still on the rise. "Foodservice" is first attested around 1970 and is now used about 1/5 of the time. ("Food-service" is not used.) So "foodservice" is still going to look strange to most people but is gaining acceptance.

After I showed your answer to our linguist, we came to the conclusion that the original term is "food service" and that "foodservice" is an alternative spelling that emerged from a company's erroneous usage of the term.
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DerethusJan 5 '12 at 16:23

Foodservice usually refers to the food service industry: businesses and people engaged in preparing meals for consumption outside the home, chiefly restaurants and institutional cafeterias and their suppliers and distributors. This may be an Americanism, as I have seen the term catering industry used in British publications; "catering" is not used so broadly in the U.S.

When two short words are used so commonly together to refer to a single concept, it is not uncommon they will merge. Airlines began as air lines (a term borrowed from railways), and indeed we still have Delta Air Lines and United Air Lines. I submit healthcare and webhosting for more contemporary examples.

I would expect to see "food service" in more conservative usage, and where I want to make a direct reference to the service of food: "The in-flight entertainment was mediocre, but the food service was good" (that is, the food was good or the manner in which it was served was good, not the corporate supplier of the food).